OREANDA-NEWS. November 22, 2010. The Management of Kernel is pleased to announce it has entered into a transaction for the sale of so-called VAT bonds with a total face value of UAH 1 072 562 thousand, representing the entire position held by the Company in the State bonds. Issued to Ukrainian subsidiaries of Kernel in reimbursement of VAT, the bonds were sold to third parties for a total amount of UAH 943 255 thousand. While the Company stated early October that it was considering, as an option, to hold the bonds to maturity, the well-supported demand for Ukraine sovereign risk has led to investors bidding higher prices for the bonds, eventually presenting the Company with an attractive offer to sell the bonds at a 12 percent discount to par value, a substantial improvement to the initial 20 percent discount asked by investors immediately following issuance of the bond.

While the sale of the State bonds translates into a charge accounted for in the first quarter of our current year, the Management of Kernel views the transaction as an attractive opportunity to sell, at a reasonable price, a sizable asset carrying currency risk and, therefore, as a significant overall improvement to the risk profile of the Company.